ANALOGIC CORP - 10-Q Quarterly Report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the period ended October 31, 2003


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 0-6715

ANALOGIC CORPORATION

(Exact name of registrant as specified in its charter)


Massachusetts		04-2454372

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


8 Centennial Drive, Peabody, Massachusetts		01960

(Address of principal executive offices)		(Zip Code)

(978) 977-3000

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx Noo

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yesx Noo

The number of shares of Common Stock outstanding at November 28, 2003 was 13,517,281.

ANALOGIC CORPORATION

TABLE OF CONTENTS


Part I. FINANCIAL INFORMATION
	ITEM 1. Financial Statements
		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
	Item 4. Controls and Procedures
PART II - OTHER INFORMATION
	Item 6. Exhibits and Reports on Form 8 - K
SIGNATURES
EXHIBIT INDEX
EX-31.1 SECTION 302 CERTIFICATION OF C.E.O.
EX-31.2 SECTION 302 CERTIFICATION OF C.F.O.
EX-32.1 SECTION 906 CERTIFICATION OF C.E.O.
EX-32.2 SECTION 906 CERTIFICATION OF C.F.O.

TABLE OF CONTENTS


			Page No.

Part I. Financial Information
	Item 1. Financial Statements
		Unaudited Condensed Consolidated Balance Sheets as of October 31, 2003 and July 31, 2003		3
		Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended October 31, 2003 and 2002		4
		Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended October 31, 2003 and 2002		5
		Notes to Unaudited Condensed Consolidated Financial Statements		6-12
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			13-21
	Item 3. Quantitative and Qualitative Disclosures about Market Risk			21
	Item 4. Controls and Procedures			21-22
Part II. Other Information
	Item 6. Exhibits and Reports on Form 8-K			23
	Signatures			24
	Exhibit Index			25-29

Part I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

ANALOGIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share data)


			October 31,			July 31,
			2003			2003

Assets
Current assets:
	Cash and cash equivalents		$	130,854		$	136,806
	Marketable securities, at market			36,456			41,155
	Accounts and notes receivable, net of allowance for doubtful accounts of $4,208 at October 31, 2003 and $4,189 at July 31, 2003			53,385			53,875
	Inventories			71,778			69,548
	Costs related to deferred revenue			16,811			14,796
	Refundable and deferred income taxes			12,804			13,058
	Other current assets			7,946			6,069

		Total current assets		330,034			335,307
Property, plant and equipment, net				87,751			83,926
Investments in and advances to affiliated companies				12,570			14,050
Capitalized software, net				6,955			6,339
Goodwill				2,306			2,306
Intangible assets, net				12,722			11,708
Costs related to deferred revenue				206			206
Other assets				2,390			2,533

		Total Assets	$	454,934		$	456,375

Liabilities and Stockholders’ Equity
Current liabilities:
	Mortgage and other notes payable		$	2,008		$	1,277
	Obligations under capital leases			173			180
	Accounts payable, trade			19,898			21,162
	Accrued liabilities			20,251			24,412
	Deferred revenue			29,924			30,084
	Advanced payments and other			6,666			5,798
	Accrued income taxes			5,601			5,867
	Accrued dividends payable			1,081

		Total current liabilities		85,602			88,780

Long-term liabilities:
	Mortgage and other notes payable			3,777			3,837
	Obligations under capital leases			292			327
	Deferred revenue			1,679			1,743
	Deferred income taxes			5,069			5,175

		Total long-term liabilities		10,817			11,082

Commitments and guarantees (Note 13)
Stockholders’ equity:
	Common stock, $.05 par			710			710
	Capital in excess of par value			48,025			47,229
	Retained earnings			319,879			320,328
	Accumulated other comprehensive income			1,702			709
	Treasury stock, at cost			(6,526	)		(6,777	)
	Unearned compensation			(5,275	)		(5,686	)

		Total stockholders’ equity		358,515			356,513

		Total Liabilities and Stockholders’ Equity	$	454,934		$	456,375

The accompanying notes are an integral part of these unaudited condensed financial statements.

ANALOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)


			Three Months Ended
			October 31,

			2003			2002

Net revenue:
	Product		$	63,912		$	123,228
	Engineering			8,621			6,380
	Other			2,436			2,676

Total net revenue				74,969			132,284

Cost of sales:
	Product			39,308			67,633
	Engineering			2,804			4,896
	Other			1,209			1,241

Total cost of sales				43,321			73,770

Gross margin				31,648			58,514

Operating expenses:
	Research and product development			15,303			11,377
	Selling and marketing			8,083			7,934
	General and administrative			8,473			7,833

				31,859			27,144

Income (loss) from operations				(211	)		31,370

Other (income) expense:
	Interest income			(1,124	)		(1,288	)
	Interest expense			73			69
	Equity in unconsolidated affiliates			157			1,238
	Other			(106	)		(343	)

				(1,000	)		(324	)

Income before income taxes				789			31,694
Provision for income taxes				158			12,044

Net income			$	631		$	19,650

Net income per common share:
		Basic	$	0.05		$	1.49
		Diluted		0.05			1.48
Weighted average shares outstanding:
		Basic		13,381			13,173
		Diluted		13,547			13,252

The accompanying notes are an integral part of these unaudited condensed financial statements.

ANALOGIC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)


			Three Months Ended
			October 31,

			2003			2002

OPERATING ACTIVITIES:
Net income			$	631		$	19,650
		Adjustments to reconcile net income to net cash provided (used) by operating activities:
		Deferred income taxes		(547	)		(429	)
		Depreciation and amortization		5,300			4,341
		Allowance for doubtful accounts		2			685
		Loss (gain) on sale of property, plant, and equipment		(21	)		3
		Equity in unconsolidated affiliates		157			1,238
		Compensation expense from stock grants		411			279
		Net changes in operating assets and liabilities		(8,164	)		(20,159	)

NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES:				(2,231	)		5,608

INVESTING ACTIVITIES:
	Investments in and advances to affiliated companies			(19	)
	Return of investment from affiliated company						516
	Acquisition of businesses, net of cash acquired			(1,000	)		(1,751	)
	Additions to property, plant and equipment			(7,097	)		(6,892	)
	Capitalized software			(983	)		(545	)
	Proceeds from sale of property, plant and equipment			100			49
	Maturities of marketable securities			4,465			3,685

NET CASH USED FOR INVESTING ACTIVITIES				(4,534	)		(4,938	)

FINANCING ACTIVITIES:
	Payments on debt and capital lease obligations			(124	)		(103	)
	Issuance of stock pursuant to exercise of stock options and employee stock purchase plan			919			137

NET CASH PROVIDED BY FINANCING ACTIVITIES				795			34

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS				18			(321	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				(5,952	)		383

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD				136,806			123,168

CASH AND CASH EQUIVALENTS, END OF PERIOD			$	130,854		$	123,551

The accompanying notes are an integral part of these unaudited condensed financial statements.

ANALOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share data)

1. Basis of presentation:

The unaudited condensed consolidated financial statements of Analogic Corporation (the “Company”) presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the results for all periods presented. The results of operations for the three months ended October 31, 2003, are not necessarily indicative of the results to be expected for the fiscal year ending July 31, 2004, or any other interim period.

These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended July 31, 2003, included in the Company’s Form 10-K as filed with the Securities and Exchange Commission on October 29, 2003.

The financial statements have not been audited by independent certified public accountants. The condensed consolidated balance sheet as of July 31, 2003, contains data derived from audited financial statements.

Certain financial statement items have been reclassified to conform to the current year’s financial presentation format. The Company reclassified certain intangibles and goodwill balances related to the Company’s 19% ownership of Cedara Software Corporation to investment in and advances to affiliated companies in the Condensed Consolidated Balance Sheets as follows:


	As Reported					Revised
	July 31, 2003		Reclassifications			July 31, 2003

Goodwill	$	3,596	$	(1,290	)	$	2,306
Intangible assets		14,891		(3,183	)		11,708
Investment in and advances to affiliated companies		9,577		4,473			14,050

The Company also reclassified in the Condensed Consolidated Statements of Operations the amortization of intangible assets related to Cedara Software Corporation from general and administrative expense to equity in unconsolidated affiliates as follows:


		As Reported					Revised
		October 31, 2002		Reclassifications			October 31, 2002

Operating expenses:
	General and administrative	$	8,085	$	(252	)	$	7,833
Other (income) expense:
	Equity in unconsolidated affiliates		986		252			1,238

2. Stock-based compensation:

As permitted by Statement of Financial Accounting Standards No. 148 (“SFAS 148”), “Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment of FASB statement No. 123,” and Statement of Financial Accounting Standards No. 123 (“SFAS 123”) “Accounting for Stock-Based Compensation,” the Company continues to apply the accounting provisions of the Accounting Principle Board (“APB”) No. 25, and related interpretations, with regard to the measurement of compensation cost for options granted under the Company’s equity compensation plans.

ANALOGIC CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

If the Company had adopted the fair value method described in SFAS 123, the results of operations would have been reported as follows:


		Three Months Ended
		October 31,

		2003			2002

Net income, as reported		$	631		$	19,650
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects			329			174
Deduct: Stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects			(1,065	)		(1,013	)

Pro forma net income (loss)		$	(105	)	$	18,811

Earnings (loss) per share:
	Basic-as reported	$	0.05		$	1.49
	Basic-pro forma		(0.01	)		1.43
	Diluted-as reported	$	0.05		$	1.48
	Diluted-pro forma		(0.01	)		1.42

3. Balance sheet information:

Additional information for certain balance sheet accounts is as follows for the dates indicated:


		October 31,		July 31,
		2003		2003

Inventories:
	Raw materials	$	35,592	$	37,155
	Work-in-process		13,129		15,003
	Finished goods		23,057		17,390

		$	71,778	$	69,548

Accrued liabilities:
	Accrued employee compensation and benefits	$	10,238	$	13,203
	Accrued warranty		6,837		7,302
	Other		3,176		3,907

		$	20,251	$	24,412

Advance payments and other:
	Ramp-up funds	$	2,860	$

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents